Central Australian Holidays Pty Ltd (CAH) was a tourism business which specialised in tours of Central Australia. The Directors were Abe (the managing director) and Ben (an executive director). CAH was struggling financially due to the COVID pandemic and border restrictions. CAH was desperate to get more local tourists coming to its resorts in Central Australia to improve its cash flow. Abe was aware of how difficult it was for CAH to pay its current debts on time. However, Ben paid no attention to this issue, and he left this for Abe to worry about. CAH was invited to a tourism conference in Sydney, where they hoped to learn about new markets. Abe however was ordered to isolate and quarantine for 2 weeks as he was exposed to the COVID virus. Before he was quarantined, Abe sent Ben to the Expo in Brisbane and to pretend to be the Managing Director of CAH. Ben is given business cards which described him as ‘Managing Director’ of the company, and the company credit card to use. Abe asked Ben to look for products that might help their business, but firmly said that nothing should be purchased without Abe’s approval due to the company’s ‘deep financial difficulties’. On day two of the Expo, Ben was amazed by a brand-new computer system (the ‘A1-Z”) developed by Komputers R Us. The retail price of the system is $5,000, but it was available for purchase by Expo guests for just $2,500. Ben realised that the ‘A1-Z’ would be of great benefit to CAH and would cut its administrative costs enormously. Ben, without seeking permission from Abe, bought the ‘A1-Z’, and he did so on behalf of CAH, showing his business card to the Komputers R Us representative, signing the contract as the Managing Director and using the company credit to pay. Three days later Ben told Abe about the purchase of the ‘A1-Z’. Abe was shocked and angry – he said that CAH could not even pay its existing creditors on time. Komputers R Us are now demanding that CAH pay for the full amount. IVI Advise Abe and Ben: (a) Whether they have breached their duty to avoid insolvent trading? (b) Whether they can use any defences to limit or remove liability? (3+ 5 = 8 marks) Le Advise Abe and Ben: (c) Whether Komputers R Us can sue CAH for the $2,500
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